Friday 9 May 2014 10.35 EDT
First published on Friday 9 May 2014 10.35 EDT

When it comes to sustainability and corporate social responsibility, many assume that a culture of corporate individualism leads companies to seek as much reputational benefit as possible by pretending to be responsible, while in fact merely giving the crumbs from the table. Or, putting it another way, many suspect that firms engage in "greenwashing" - talking the talk plentifully, but walking the walk as little as possible.

Indeed while we are inundated by endless corporate social responsibility reports, the number of firms caught red-handed harming the environment or failing to assume their social responsibility is not diminished.

At first glance laissez-faire economics, small government and intense competition do not seem to offer companies strong incentives to engage in substantive corporate social actions. When facing less pressure from governments to engage in responsible behaviours, we would naturally expect companies to free-ride and do as little as possible.

However, research I conducted with Samuel Touboul, from the Society and Organization Research Centre, HEC Paris, shows that when societies are willing to rely more on individual responsibility than on governments, it paradoxically creates pressure on other powerful entities to step in to this "institutional void".

In those instances where no other body or institution exists to engage in doing genuine good for society, companies are surprisingly likely to take that role. They are more likely to engage in philanthropy, community support, and substantive pro-environmental actions. So the suspicion that firms would just talk the talk for public relations gains rather than engage in real actions for social good is unfounded.

To understand this puzzle, the research explored the relationship between national attitudes to individual responsibility and competition – as key beliefs associated with economic liberalism – and the propensity for firms to greenwash.

There are as many different perceptions of economic liberalism as there are countries. We conducted a large scale quantitative study of thousands of companies over the 2002-2008 period, which set out to disentangle the beliefs in the qualities of liberalism, which we measured through a survey of more than 200,000 individuals in 38 countries. The survey asked, on a scale of 1 to 10, whether respondents considered that "competition is good" or "harmful", and whether they thought government, rather than individuals, "should take more responsibility".

On the other side of the equation, we measured greenwashing by comparing the quantity of claims made by the company (eg does the company declare it controls its CO2 emissions? Does it say it monitors the impact of its activity on local communities? etc.) and the actual implementation of those initiatives on four different dimensions: economic, environmental, social and governance responsibility.

The survey showed that national conceptions of economic liberalism differ from one country to another. For example, in the US or France, economic liberalism is associated with belief in the virtue of both competition and small government. By contrast, in developing countries such as China and India, individuals tend to believe in the value of economic liberalism associated with strong competition rather than small government.

We found when competition is positively perceived, companies are prompted to focus on the talk. By contrast, when national attitudes support individual rather than government responsibility, companies tend to more concretely intervene for the protection of stakeholders' and individual rights and to make a contribution to the social good.

In countries such as France or the US, this means companies are comparatively inclined to focus on concrete actions rather than on mere communication, while the competitive pressures in emerging countries such as China or India are so strong that they induce firms to greenwash more.

There are subtle differences in how people conceive economic liberalism. Conceptions differ from country to country, and they in turn influence the various business mindsets towards corporate social responsibility. Once this subtlety is taken in account, the role of economic liberalism is not all detrimental to the relationship between business and society.

Paradoxically, the more "laissez-faire" our attitude to the economic environment, the more companies go beyond their call of duty. Thinking that economic liberalism crowds out moral convictions among business decision makers is simply not supported by the evidence.

Thomas Roulet is Novak Druce Research Fellow at Saïd Business School, University of Oxford. He can be followed on twitter.

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